Kingfisher chief executive warns of tough times ahead

The chief executive of the Kingfisher DIY group yesterday added his voice to those warning of a tough trading period ahead and said there would be little chance of an upturn in consumer confidence until it was clear that interest rates are heading down.

"In the UK the outlook for consumption is a little more uncertain because of interest rates and house prices", said Gerry Murphy. "The next six months will be a little tougher than the last six." He added there was little chance of improvement "until there is a clear signal that interest rates have peaked".

Mr Murphy was speaking as Kingfisher, Europe's biggest DIY business and the parent group of Britain's B&Q and the French Castorama chain, reported a 6.2% increase in first half profit to £189m. The shares lost 11p, closing at 181p.

The group said the international business - which is now more than half of group sales and stretches from China to Ireland - "performed well overall", while B&Q had ben hit by "the worst summer in living memory".

The highlights overseas were France, with sales up 9.5% and Poland, where sales climbed 42% and profits rose 62% to £45m. Kingfisher operates 37 Castoramas in Poland.

The 59 B&Q outlets in China - which designed and fitted out 18,000 apartments in the six months - recorded an increased loss of £9.5m, up from £5.1m last year. Kingfisher blamed the downturn on new government rules governing supplier terms which had resulted in one-off costs.

In the UK like-for-like sales at B&Q were up 2% - compared with the 8% dip at rival Homebase revealed last week - but profit dipped nearly £5m to £78m as a result of a near-£16m charge for revamping large stores to appeal to home improvers rather than DIYers.

B&Q is trying to "feminise" its stores after research showed that many of its shoppers were women looking for inspiration to improve their homes. They are not DIY fans but find others or hire tradesmen to do their building or installation work.

Retail strong

Retailers enjoyed better than expected sales last month, but they had to slash their prices for a second month in a row. The Office for National Statistics said sales volumes rose 0.6% in August, lifting the annual rate to 4.9% - the strongest since March. Growth was strong across most sectors, except household goods, which almost completely reversed the previous month's rise. Food sales rose 1.3%, the biggest gain in more than a year, while clothing and footwear sales recorded a 1.6% rise. Prices fell 1% compared with August last year.